Sanofi chairman Jean-Francois Dehecq (left) with Aventis chief Igor Landau in Paris on Monday. (AFP)

London, April 26: Aventis, the French-German drug company, on Sunday night accepted a sweetened offer from once-hostile bidder Sanofi-Synthelabo, in a deal that values Aventis at €55 billion ($65 billion), sources close to the negotiations said.

The action came shortly after Novartis, the Swiss drug company, said it would begin formal talks with Aventis about a merger but then withdrew because none of its conditions for a deal had been met. The agreement with Paris-based Sanofi satisfies the French government’s quest to make sure France remains home to a large pharmaceutical company.

The combined Aventis and Sanofi will be the world’s third-largest pharmaceutical company, behind Pfizer and GlaxoSmithKline, with about $30 billion in sales in 2003. The deal is expected to be announced on Monday.

The higher offer represented a shift for both Sanofi, which had steadfastly refused to alter its $60 billion hostile bid for Aventis, made in January, and for Aventis, which had insisted that it would be a stronger company if it did not combine with Sanofi.

Sanofi is offering five of its own shares, plus €120, for each six shares of Aventis stock, said one person close to the negotiations. The previous offer was five shares of Sanofi stock plus €69 for each six Aventis shares.

All 16 members of Aventis’ board were said to have voted to approve the deal, after a seven-hour board meeting on Sunday. Even as the board was meeting, French government officials, who have been eager to see Aventis remain a French company, were promoting the benefits of a combination with Sanofi.

The French health minister, Philippe Douste-Blazy, said in an interview early Sunday evening with French radio’s Europe One that he favoured a bid for Aventis by Sanofi over an offer by Novartis. “I would be very happy to see the formation of a very big French group, among the biggest in the world,” he said, according to wire reports.

On Sunday night, he welcomed the deal even before it was formally announced, saying it would allow France to have “one of the largest pharmaceutical groups in the world,” according to Agence France-Presse.

Sanofi’s bid for Aventis is expected to be approved by the European Commission on Monday, according to one person close to the situation. Paris-based Sanofi has been trying to pre-empt any regulatory concerns about the combination in recent weeks.

On April 13, Sanofi said it would sell the blood-thinning drugs Arixtra and Fraxiparine, as well as the manufacturing plant in northern France that makes them, to GlaxoSmithKline, if the bid for Aventis were successful.

Since Sanofi made its original bid, Aventis shareholders and executives have claimed the offer was undervaluing their company. Aventis’ stock has risen steadily since then, on hopes that Sanofi would raise its bid or a white knight would enter the battle.

Aventis closed Friday at €66.80 on the Frankfurt exchange, 14.95 per cent higher than the value of the original Sanofi offer.

The French government may have played an instrumental part in orchestrating the new bid. On Friday, Aventis chairman and chief executive Igor Landau met Sanofi chairman Jean-Francois Dehecq, at the behest of the French finance minister, Nicolas Sarkozy. Neither the government nor representatives from either company provided any details about what happened, but it marked the first time that the two executives had met since Sanofi began its hostile offer. Previously, Landau had been highly critical of Sanofi’s prospects.

Markets will be closely watching the European Commission’s response to the news. Previously, the commission’s intervention in pharmaceutical deals has been confined to asking companies to sell some products.

Speaking during a daily news briefing on April 22, a spokeswoman, Amelia Torres, noted that the European Commission had never turned down a pharmaceutical merger.